220 | Is It Okay to Change Your Budget?

When you create a budget, is it bad to change it? Do you have to stick with it?

These kinds of concerns come up often with my clients when we create their budget (or spending plan if you like that term better).

In this episode, let’s talk about whether it’s okay to change your budget and how to approach the topic of changing your budget.

• • fear of changing your budget

  • two reasons that you will inevitably change your budget

  • how to view changes to your budget

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You’re listening to Wealthyesq. We are a community of lawyers who believe that true wealth is having control of our time. I’m Rho Thomas, and as a busy wife, mom and former Biglaw associate, I know all too well the tension between the culture of the legal profession and pretty much everything else you want to do in life. That’s why each week, I’m bringing you the information and tools you need to improve your money mindset and manage your money to create true wealth. Because ultimately, it’s not about the money. It’s about the freedom and flexibility the money affords.

Hey friend. Welcome back to the show. I hope you’re doing well and having an amazing day so far. Today, we are talking about changing your budget, whether it’s okay to change your budget. This is something that comes up pretty often. When my clients first put together a book or spending plan and they’re going through it and actually using it, there’s almost this fear of changing the plan or changing the budget. Lawyers sometimes think, maybe, often think in really black and white terms, where it’s either one thing or it’s another thing. And so we sometimes believe that once we decide something, that’s it, it has to be said. There’s no changing it. There’s no going back. It’s a permanent decision. But that’s not the case. Nine times out of 10, things typically aren’t set in stone, and we can change our decisions. And this is especially the case with personal finance. So something that I work on with my clients is the fact that they can and will change their budgets. And there are two primary reasons that budget changing, your budget changing is inevitable. So first, when you’re just learning how to manage your cash flow, your best intentionally, you don’t know what numbers really need to be in your budget. Yes, you can create a plan for how you’re going to spend. You can look at your previous spending and base your plan on that like that’s the process that I take my clients through, where we will look back at their spending for the last one to three months, and then we tweak that spending to create a budget, or to create a spending plan that makes more room for their goals but is realistic for their lives. And I use the terms budget and spending plan, and some people just really don’t like the term budget. If you don’t like the term budget, you can call it your spending plan. It’s just how you are going to use your money, how you’re planning to use your money in a given time period. So I will take my clients through this class, looking back at their previous spending, creating a budget that fits their lives, but still makes them for their goals. But just because we create that budget, you know, just because we create doesn’t mean that it’s going to work smoothly. Right off the bat, you don’t know what the right spending amounts are for the different categories of things you spend on, yet, you’re not used to setting up plans like this, so your plan is probably going to be wrong. You are making an educated decision about how much you’re going to spend in different categories, but you really don’t know until you actually get in there and you’re actually spending the money, and you’re seeing where things are going. So there might be categories where you created this plan and you name it for that amount, you know, months in a row. So you thought you could spend X in this category. But it turns out that the amount that you planned for wasn’t realistic style, like maybe it was an idealistic idea of what you should be able to spend, but it’s not what you can actually spend living in New York or having a family of four, or whatever the circumstances are for your life. It may be the amount that you want to be able to spend, but it’s just not realistic. It is okay to change your budget to reflect that. So I thought I was going to be able to spend X on groceries. It turns out I haven’t been able to get there. That’s just not realistic for my life. That’s okay. You can change your budget and plan to spend a higher amount on groceries going forward, that’s going to be more realistic. So that is the first reason that your budget will inevitably change. Your initial plan for what you want to spend is probably going to be off base. You have to actually test it and work with it to come up with numbers that are right for you and your life. The second reason will change is because budgets are meant to change from month to month and generally over time. So yes, you create a general plan, and there will be some costs that don’t change or that don’t change much, but your spending naturally fluctuates from month to month. Nearly impossible to spend the exact same amount on every single category every single month. The expenses that you have this month might not be the same as the expenses you had last month or the expenses you’ll have next month. For example, this month you might be taking a vacation. Next month, maybe it’s someone’s birthday. The month after that, it’s an anniversary or someone or some other special occasion. Your budget has to adjust to fit those things. You don’t just stay within this budget, fixed budget that says you can only spend X in this category or Y in that category, because your budget is a reflection of your life and the things that you need and want to spend on, if you have friends visiting or you’re traveling or exactly maybe you’ll up the amount that you plan to spend eating out or if you’re going on vacation, maybe you up the amount you plan to spend on new clothes. If you have family coming to your house for the holidays, maybe you’ll be spending more on groceries. If there’s a birthday or a party or some other special event, your spending is going to be different based on that. And then let’s not forget that, over time, your income will likely increase and you may experience bigger life changes, like moving or getting married or having kids or getting divorced. It’s not realistically, your income and your spending is going to stay the same as the very first budget that you create. From month to month, forever into infinity. Your budget has to change because your life is going to change. So that is the second reason that your budget will change. And here’s the thing, a lot of people make needing to change the budget into some sort of failure, like it’s some sort of problem with them, and it’s not that at all. Your budget is that it’s like the other part of your personal finances. Your budget simply tells you how much you were planning to spend, how much you were actually able to spend, across these different categories, if necessary, you can make changes to those things. Your budget is not this rigid thing that dictates what you can and can’t do, and it’s definitely not a reflection on you or some sort of moral shortcoming that you have because you end up changing it. Change is normal with budgeting, and I think if we embrace that change rather than fighting against it, we will all have a much better experience with managing our money. You set the best budget you can at the start, and if your estimates are in place to change it over time. You create a new budget each month based on whatever’s coming up in your life. Don’t feel like you have to stay stuck with one budget. And don’t feel like you’ve done something wrong because you’re changing it, but it’s changed. That’s just how they work. So I hope this was helpful for you. I hope it gives you some permission to change your budget without beating yourself up or feeling bad about it. It’s normal. It’s nothing to be upset about, and it is no reflection on you. All right, so that is it for this week’s episode. Please take a second to subscribe to the podcast and leave a review. Doing those things shows that this podcast is valuable, so that it will get recommended to more lawyers who can use this information. I appreciate your support. As we close out, friend, I pray that you take the information you learn here, apply it in your life, and open up to the realization that wealth is available to you. As you do that consistently, week after week, you’ll continue to take steps to regain control of your time, build wealth and live the life of freedom and choice you deserve. Talk to you later.